Retail sales increase of 1% ‘only a blip’

BETTER-THAN-EXPECTED retail sales figures for August do not reflect a change in the country’s economic fortunes, economists warned yesterday.

Retail sales rose 1% in August from July and was 4.3% higher year-on-year, according to the latest data from the Central Statistics Office (CSO) .

In July, retail sales rose 1.1% on the month but were 4.1% higher on the year. Excluding sales of motor vehicles, retail sales rose 1.8% in August from September.

But annual sales growth has fallen sharply back from a 16.2% peak in December 1999.

Yesterday’s figures at first glance point to a turnaround in the economy, but are suspiciously odd, according to IIB Bank chief economist Austin Hughes.

On closer examination the 1% rise in sales in August was only a blip.

It was mainly due to aggressive price discounting by department stores and technical factors brought about by changes in the CSO calculations, he said.

“Over the last couple of months clothing and electrical goods have been sharply discounted by retailers. Because of the glut of these items on the world market it allowed retailers to pass on the drop in prices without suffering undue hardship,” he said.

Mr Hughes said while sales were edging downwards it was however not the end of the Irish economy.

He said sales were beginning to level off and he forecast a pick up in sales for Christmas.

However, the recent IIB/ESRI consumer sentiment index signalled spending in the run up to Christmas could be the weakest in five years.

Ulster Bank senior economist, Niall Dunne agreed summer sales were the main contributor to the rise in the retail sales figures.

The boost to the exchequer from VAT returns from the August sales was nothing to get excited about, he said.

“It’s only a drop in the ocean to what the exchequer needs,” Mr Dunne added.

He said the fact that sales of new cars tumbled in September was no surprise given the fact that people were facing increased electricity, health, transport and other bills.

There was a decrease of 24% to 7,652 in the number of new cars licensed in September compared to August.

Ford was the top seller, although its total of 841 compared to more than 1,000 new Ford cars licensed in August.

Volkswagon and Opel came in second and third, while Toyota sold just 645 cars, down from almost 1,200 in August.

In the first nine months of the year, there were 136,634 new private cars licensed, representing a drop of 7% on the same period last year.

Sales of second hand cars are also suffering. First licensing of second hand private cars increased by 1.6% in September from the same month last year but fell by 18.7% in the year to date.